Oxford Technology AGMs 2019

[timbo003]

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Oxford Technology VCTs (OXT, OXH, OTT, OXF) AGM 2019


The 2019 Oxford VCT AGMs were held earlier this week (Wednesday 3rd July) at the Oxford Technology VCT offices, The Magdalen Centre, Oxford Science Park, Oxford OX4 4GA.
Links to all four Annual Reports (year ending Feb 2019) can be found on the Oxford Technology home page: https://www.oxfordtechnologyvct.com/

At this year’s AGM there were probably around 20 ordinary shareholders present, slightly down on last year. The meeting commenced at 14:00 and after a brief welcome from the OT1 chairman we had a presentation by one of the investee companies (Biocote), this was followed by a brief portfolio review from the Manager and then a Q&As session with the Manager and Directors. We then moved on to the four VCT AGMs followed by a presentation from another investee company (Arecor). Immbio were also due to present, but had to cancel at short notice, so Andrea Mica (Oxford Technology Management) stepped up to run quickly through the Immbio slide deck.

The Q1 updates (to May 31st 2019) for all four VCTs had been released earlier in the day and these are available at the following link:
https://www.oxfordtechnologyvct.com/

The announcements disclosed small decreases in NAV for OT1 (-2%) and OT2 (-3%). There was a larger decrease in NAV for OT4 (-6%) which was mainly down to the payment of a dividend during the period and there was a significant increase in NAV for OT3 (+10%) which was mainly due an increase in value of the biggest holding (Ixaris)which now accounts for around 68% of the total NAV. Given that OT3 shares are currently quoted at 30p – 65p but available to buy at 62p/share (see most recent trade data: https://www.lse.co.uk/ShareTrades.asp?s ... are=Oxft... ) and the current NAV for OT3 (99p/share), anyone buying OT3 shares at 62p/share or thereabouts are effectively buying Ixaris at a discount of around 9% to its current valuation, with the rest of the OT3 portfolio thrown in for free.


Manager’s Review:

Lucius Cary (LC) and Andrea Mica (AM) gave shareholders a 20 minute review of the combined VCT portfolio, see details below:

* Get mapping (OT1)
http://www.getmapping.com/

Get mapping is now focused on Africa, as it cannot compete against Ordinance Survey in the UK (with its £75m/annum state subsidy). Revenues increased to £8.3M last year and it made a reasonable profit (£342K) but it offers only limited growth prospects.


* Dynamic Extractions (OT4)
http://www.dynamicextractions.com/index.html

Dynamic Extractions spun out of Brunel University in 2001, it was set up to commercialise the unique and world leading Hydrodynamic Counter Current Chromatography (HdCCC) technology developed by the Brunel, which enables relatively rapid separation and purification of compounds from complex mixtures. Up until recently this has been a slow burn investment, but there has been renewed interest recently which is mainly related to the commercialisation of cannabis oil and it’s components and the company has just achieved its first significant commercial sale.


* ZuvaSyntha (OT4)
ZuvaSyntha was developing methods to produce chemicals and fuels from renewable resources, such as the low cost C1 feedstocks syngas and methanol. However, the business plan was relying on the receipt of a £1m Innovate grant which had been tentatively approved, but approval was withdrawn at a late stage based on the company not meeting the necessary maximum age criteria for qualifying SMEs.


* Scancell (OT1, OT2, OT3)
Scancell is quoted on AIM and as such most information concerning progress is publically available, but there were several significant developments highlighted for example: Delays in SCIB1 development due to Ichor delivery system, Good progress with Biontech on Moditope, a really good deal (and endorsement) from CRUK for SCIB2, strategic investment in Scancell by Life Science specialist Vulpes.

* Select Technology (OT1, OT2, OT3, OT4)
https://www.selectec.com/

Select Technology specialises in software for photocopiers and MFDs – Multi-function devices – which scan, fax, email as well as photocopy. There are two strands to the business: 1) Develop and supply software which provides functionality to the MFDs 2) They are European distributers for PaperCut, a world-leading print-management software product. The company is profitable and it now pays a dividend



Investee company Presentations

* Biocote (OT1):

https://www.biocote.com/

Sean Read (CEO) gave the presentation on behalf of Biocote who are the European leaders and No 2 globally for antimicrobial coatings to protect against microbial contamination of various surfaces that have widespread uses (healthcare, catering, domestic etc.). Approximately 90% of Biocote’s coatings are silver based (the remainder are Copper, Zinc or organic based). Coating for polyethylene pipe is the largest application and coated product is labelled up as Protected by Biocote, which is considered a positive attribute by users.

The company owns the freehold to its premises and revenues have grown by 120% over the last five years to £2.5m/year with profit of £400k. Biocote has been paying dividends to shareholders worth 100K per annum for a number of years, but increased the dividend to £150K last year.

There was a short Q&A session after the presentation during which we were told that Brexit would probably have a positive effect on business and the only real protection against competition was the brand name/brand value. In response to a question on current shareholders and the future of the company we were told that the largest shareholder (circa 30%) was Rainer Clover (present at the meeting) who was also one of the founders of the company. There are no plans to list the company on AIM and no plans to sell the company, although if a very generous offer were to come along, they would give it serious consideration.



* Arecor (OT2, OT3 and OT4)

http://arecor.com/

Sarah Howell (CEO) gave the presentation for Arecor, see link below for slide deck: https://www.oxfordtechnologyvct.com/adm ... /plugins...

Sarah also gave a presentation at the 2017 Oxford VCT AGMs (link to 2017 notes viewtopic.php?f=25&t=6265&p=66701&hilit=oxford#p66701 ), so it was interesting to learn about the progress in the last two years.

Since the 2017 the company has managed to secure funding from three new VCT/EIS institutional investors (Albion, Downing and Calculus) and they have continued with their two main business activities: 1) Formulation work for big pharma charged as fee for service (plus milestone payments/royalties if work leads to product launch) 2) In house development of improved products to treat type I diabetics.

There has been a switch in emphasis in the last two years from developing stable liquid glucagon solutions suitable for parenteral administration, to developing improved stable insulin formulations for parenteral administration, the reasons for this are entirely commercial. Arecor now have main two products in development, the first is a faster acting formulation, which avoids the time lag for onset of action which is seen with conventional formulations. The second development product is 10X more concentrated than conventional formulations (but still acts reasonably rapidly), making it suitable for administration via an insulin pump and especially suitable for children who use insulin pumps. The commercial potential for such products is estimated to be substantial, for example, Eli Lilly have successfully developed one product (Humulin) which is 5X more concentrated than standard and this commands annual sales of $1.2Bn. One direct competitor (Adocia) recently signed a deal with Lilly worth over $500m in upfront payments and milestones plus royalties, the deal eventually fell through but not before they had collected substantial milestone payments, furthermore, they have now re-licenced their product to a Chinese company in a regional deal (China only) worth $130m in milestones plus double digit royalties. Another competitor (Thermalin) recently signed a deal with Sanofi worth over $700m in milestones plus double digit royalties.

I spoke to Sarah after the meeting to ask about the status of the glucagon product, I was told that it is still going, but it is now assigned a lower priority and it is currently being funded by grants. I also asked about the technical difficulties encountered when producing the more concentrated formula for insulin. Apparently the main problem is not a solubility or viscosity issue, but one of bioavailability at the site of action and this is related to the degree of binding of the zinc at the centre of the insulin hexamer.



* Immbio (OT2, OT3, OT4)

http://www.immbio.com/

Andrea Mica gave the presentation on behalf of the company, see link to presentation slide deck below

https://www.oxfordtechnologyvct.com/adm ... /plugins...

ImmBio previously presented at the 2017 Oxford VCT AGMs (link to 2017 AGM notes: viewtopic.php?f=25&t=6265&p=66701&hilit=oxford#p66701 ) so this was a timely update.

Earlier this year Immbio signed a multi-million licensing deal with the largest Chinese Vaccine Pharma company, CNBGSinopharm, for co-development and commercialization in China of ImmBio’s lead product PnuBioVax which is a vaccine to treat pneumococcal infections, a major cause of mortality in the young and elderly (1.6M deaths worldwide per annum),

Current pneumococcal vaccines are relatively expensive and they are becoming less effective as different strains emerge, this problem is being exacerbated as antibiotic resistance becomes more prevalent (25% cases of all pneumonia now show antibiotic resistance).

Immbio’s vaccines (including PnuBioVax) have a novel mechanism of action: they protect against pathogens by mimicking the natural immune response to infection by utilising heat shock proteins. These vaccines should be active against all stains of the targeted pathogen (not just some) and they should be relatively cheap to produce. The lead product PnuBioVax has completed Phase I studies and preparations are underway for a Phase II study in elderly patients. Immbio are intending to raise £4.5m to fund the Phase II study, although this figure would be reduced if they sign further regional licencing deals for PnuBioVax.



AGM formal business:

The resolutions for each of the VCTs and the results from the proxy voting can be found at the link below:
https://www.oxfordtechnologyvct.com/
All resolutions for all four VCTs were passed unanimously, or with majorities in excess of 90%,except for the share buyback resolutions where there were between 10% and 15% of total votes opposed to the resolution for OT1, OT3 and OT4. The share buyback resolution had not been included in the list of resolutions for OT2.


Q&As:

(Note: all questions and answers are para-phrased; they are not a verbatim account)

Q: There are four companies in the OT4 portfolio which are valued at >15% of the total NAV, isn’t this breaking one of HMRCs rules?

A: No, as far as the rules are concerned we account for these investments at cost (not current value), it would only become a problem if we invested further in these companies.


Q: Are you intending to appoint new managers for OT1 and OT2?

A: We are actively looking at this and you should be aware that we were in advanced discussions with Chelverton on OT2 at the end of last year before they surprisingly pulled out at the last minute. The Chelverton/OT2 deal would have been along similar lines to the deal struck between Hygea VCT and the fund manager Seneca
https://www.investegate.co.uk/hygea-vct ... -vct-plc...

Taking over the management of Hygea presented Seneca (an established EIS fund manager) with a good opportunity to get a foothold in the VCT market, as it allowed them to raise funds on a separate share class (B shares) and pay out dividends from year one on the B shares without falling foul of HMRC rules. Had Seneca set up a new VCT from scratch, they would probably not have been in a position to pay dividends for several years and this would have put them at a serious disadvantage when competing for new investor funds against established VCTs run by other managers.

The deal was also good for Hygea shareholders, as they have no set up costs and no running costs to pay for three years, by which time the run-off may be near completion and the shares could be merged with the B shares pool. Furthermore, it protects those shareholders who deferred capital gains with their original purchase. The only realistic alternative would be a run-off followed by liquidation, but this would trigger capital gains liabilities for those shareholders with deferred gains.


Q: This morning’s RNS from OT2 stating the deferred consideration for OC Robotics was imminent was good news, but could this mean that OT2 may breach the rule stipulating that 80% of net assets must be held in qualifying investments?

A: At the moment this is certainly not a problem, as we currently only account for half of the deferred payment, but we will be closer to the threshold when the cash is received.


Afternoon Tea and cake:

This year’s AGMs were held at a later time than previous AGMs, so there was no buffet lunch with wine available after the meeting and shareholders had to content themselves with tea, coffee and cake. I took the opportunity to learn more about Arecor from Sarah Howell (see notes above) and I also asked the Chairman of OT3 whether or not there was now a performance incentive payment liability following this morning’s RNS from OT3 (which recorded a big jump in NAV) and also whether such a liability was accounted for in the NAV figure announced earlier.

I was told there was now a small (£5K) liability and this was taken into account when calculating the new NAV. However, there was a wish to keep all four VCT Q1 statements succinct, so there was no detail in the RNS, but there will be a full explanation on any performance fee liabilities with the next set of results.

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[timbo003]

The links to the Arecor and the Immbio presentations seem to have become abbreviated and dysfunctional in the copy and paste process, but these replacement links should work (I hope):

Arecor: https://www.oxfordtechnologyvct.com/adm ... 202019.pdf
Immbio: https://www.oxfordtechnologyvct.com/adm ... 202019.pdf

Also I have now stumbled across a recent (Jan 2019) proactiveinvestor interview with Sarah Howell from Arecor which should be of interest to Oxford Tech and Albion VCT shareholders as well as investors in the latest Calculus and Downing EIS funds
https://www.youtube.com/watch?v=OunSraE8zxg

[BusyBumbleBee]

Up to your usual high standard - Tim - thanks for this as I know you must be very busy at the moment - with kind regards = BBB

[bernie]

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Oxford Technology VCTs (OXT, OXH, OTT, OXF) AGM 2019

Given that OT3 shares are currently quoted at 30p – 65p but available to buy at 62p/share (see most recent trade data: https://www.lse.co.uk/ShareTrades.asp?s ... are=Oxft... ) and the current NAV for OT3 (99p/share), anyone buying OT3 shares at 62p/share or thereabouts are effectively buying Ixaris at a discount of around 9% to its current valuation, with the rest of the OT3 portfolio thrown in for free.
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Hi Timbo003,

Thanks for the fascinating post. Was there any discussion regarding why OT3 has such a high discount?

Thanks,

Bernie.

[timbo003]

>>>>BBB, yes I’m quite busy at the mo’ (as you correctly guessed), but I will definitely find time for the Albion Venture AGM if you can make it down for that one.

>>>>Bernie, nothing came up regarding the large discount for OT3, but there was a comment from one of the OT4 shareholders on the liquity/market in OT4 shares. The Director's response was that there were buyers for the shares and mentioned the recent purchase by one particular value investor, Shivani Palakpari Shree Parikh. She has also bought into the other Oxford VCTs , but only seems to buy when there is a decent discount and it would not surprise me if it was Shivani who made one or both of purchases in OT3 on the day of the AGM (after the hike in NAV). None of the four Oxford VCTs conduct regular share buybacks (and as far as I am aware they do not intend to in the future), so I guess the market has to find its own level.

[bernie]

I tried putting in an order with IG Index, to buy OT3, but it said that online dealing is disabled. Could you recommend a decent broker that would let me do it?

[timbo003]

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A couple of recent items on OT1 worthy of comment:

Firstly, from the recently released OT1 half year results:

https://www.investegate.co.uk/oxford-te ... 0000H3437/

I am also pleased to report that the Company has agreed a reduction in its ongoing management fees. The Company’s investment manager is now charging an ongoing fee of 0.5% of NAV per annum, a 50% reduction. Several of the directors have also agreed to a partial waiver of their directors’ remuneration, which will reduce the total annual spend on directors’ emoluments to £16,000, a 22% reduction. These changes have been backdated to the start of the current financial reporting period, i.e. 1 March 2019.

Directors of other VCTs please note!



....and news (released on Monday) from one of the OT1 portfolio companies "Get mapping" which constitutes approximately 8.4% of the OT1 portfolio, also once a high flying dot com darling and allegedly one held within Her Majesty's Royal portfolio:

https://www.investegate.co.uk/getmappin ... 17167891P/

The Board believes this is an appropriate point to undertake a strategic review of the Company's options. Although the Board believes that Getmapping has a secure future as an independent business, the Board believes that the Company would benefit from additional funding to accelerate growth with the latest technology. The Board is therefore open to offers of minority investment, an offer for the entire issued share capital of the Company from a third party, or the sale of one or more of the Company's operating divisions.

Discussions relating to the sale of the Company as a whole are being conducted under the framework of a "formal sale process" under the City Code on Takeovers and Mergers (the "Code"). The Company has appointed EGR Corporate Broking Limited, which is advising Getmapping as Independent Adviser for the purposes of Rule 3 of the Code.

The Company expects this review to be concluded by the end of 2019. Shareholders are advised that there can be no certainty that any offers will be made, any sales concluded, nor as to the terms of any offer or sale.

[timbo003]

A slither of news on Arecor today (reported on Proactive Investor) which should be of interest to OT2, OT3 and OT4 shareholders (Arecor is also held in some of the Albion VCT portfolios)
https://www.proactiveinvestors.co.uk/co ... 05317.html

[timbo003]

Worth commenting on the recommended offer this week for AIM listed Castleton Technologies by MRI Software

https://www.londonstockexchange.com/exc ... 02015.html
https://www.londonstockexchange.com/exc ... 03674.html

Castleton are one of the largest holdings in the OT4 portfolio and the offer at 95p/share should result in OT4 receiving just over £830K. Given that there are around 11.5m OT4 shares in issue, this is equivalent to around 7.2p/share and presumably much of this will get paid out later this year to shareholders as dividend.

[BusyBumbleBee]

Hi Tim - good to see you on board again

Enjoying lock-down ? I am, but then I live on a small farm with plenty of space and have a major project with the 500 or so parishes here on well-being and green issues to keep me fully occupied. Using Zoom a lot for conferencing.

and have you heard anything from Nick?

very best wishes - John

[scotia]

Oxford Technology 3 Annual Financial Report, for the year to 29th February, has been released on 19th May 2020 -https://www.lse.co.uk/rns/OTT/annual-financial-report-l96y4qh36k5qh4u.html

I'm afraid it does not make comfortable reading, with the NAV reducing from 89.5p to 60.6p. And a further RNS of 21st May further reduced this to 56.6p.

To summarise the report (hopefully accurately!):-
The top woe was Ixaris - a payments related business. It came close to being sold in December at a price significantly above carrying value, but the sale stalled on the collapse of Thomas Cook, and the offer was withdrawn. The travel restrictions due to Covid-19 have significantly affected the travel payments business.
Another woe was the need to sell Orthogem (biomaterials) for a nominal amount, since it was unable to raise significant funding to continue to trade. VCT rules governing the age of companies prevented the Oxford VCTs from aiding with its further funding.
Scancell (immunotherapies) continues its long journey - and has received further funding from other sources in the past year. But a year was lost in trials due to difficulties with the USA Food and Drug Administration.
ImmBio (Innovating Vaccines) has received continued support, but there is some disquiet on its progress in receiving grants
The most positive news concerned Arecor (biopharmaceuticals) which is apparently making excellent progress

I bought into OTT about 7 years ago - but it looks like I'll need to be patient

[timbo003]

I'm afraid it does not make comfortable reading, with the NAV reducing from 89.5p to 60.6p. And a further RNS of 21st May further reduced this to 56.6p.

Indeed, but at least Ixaris lives to fight another day, although it is frustrating that OT3 (and the Foresight VCTs) missed out on a bumper payment by just a few days.

Going forward, Arecor is a bright spot. They are currently well funded and in a good place right now with their diabetes development program (see Proactive review from earlier this year):
https://www.proactiveinvestors.co.uk/co ... 15311.html

[scotia]

Going forward, Arecor is a bright spot. They are currently well funded and in a good place right now with their diabetes development program (see Proactive review from earlier this year):
https://www.proactiveinvestors.co.uk/co ... 15311.html

Thanks for the Arecor link. I was a bit troubled when It mentioned Phase 1 trials - which often indicates a long time (or possibly never) before there is a marketable product. However I was slightly re-assured that since the product is simply a reformulation of existing drugs, it should be able to progress faster. Lets hope so!
I have no idea when, if ever, Scancell will get a product to market. It now looks like they are jumping on the Covid-19 vaccine bandwagon (anticipated Phase 1 trial in Q1 2021). I wish I could see real progress towards application of their original work. Perhaps I'm not sufficiently patient.

[timbo003]

Nice update from Arecor on Monday (OT2, OT3 and OT4), see Proactiveinvestor interview with CEO Sarah Howell:

https://www.proactiveinvestors.co.uk/co ... 21911.html

Worth also noting that the Albion VCTs are also invested in Arecor

[timbo003]

Castleton are one of the largest holdings in the OT4 portfolio and the offer at 95p/share should result in OT4 receiving just over £830K. Given that there are around 11.5m OT4 shares in issue, this is equivalent to around 7.2p/share and presumably much of this will get paid out later this year to shareholders as dividend.

OT4 declared a 5p interim dividend today following the Castleton disposal, which represents around 70% of the Castleton proceeds:
https://www.investegate.co.uk/oxford-te ... 0000H5993/

It's the Oxford (virtual) AGMs on Thursday afternoon (dial in available from 13:45), so if any shareholders wish to participate the dial in details can be found here:
https://www.oxfordtechnologyvct.com/

[timbo003]

I attended the Oxford VCT virtual AGMs yesterday, it was the first AGM that I have attended over a Zoom conference call, so it was an interesting experience. I am a bit occupied with ShareSoc activities at the Virtual Mello investor conference today and tomorrow, but will endeavour to write up a few notes over the next few days